Nominal GDP Continues to Track 4% Growth

There’s a growing movement calling for the Federal Reserve to track a regular increase of nominal (including inflation) GDP. The number 5% is most frequently cited.

What these proponents say is that the Fed should draw a 5% trendline. If nominal GDP drops below that trendline, they ought to loosen monetary policy. If it’s above 5%, they ought to tighten.

What’s interesting is how closely nominal GDP has tracked a 5% growth trendline over the last 14 quarters. Not only is it close, I doubt the Fed could have done a better job if it had tried.

The blue line is nominal GDP and the black line is a 4% trendline.


Posted by on April 29th, 2013 at 11:57 am

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